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What does "Tipping is Customary" mean in 8027?

In Form 8027, the term "Tipping is Customary" refers to the practice where customers typically leave tips for food and beverage employees as part of the service provided.

This applies to establishments such as restaurants, bars, hotels, and other food service businesses, where tipping is a common practice for employees such as waitstaff, bartenders, and other service personnel. 

This is an essential criterion for determining whether an establishment is required to file Form 8027. If your establishment fits this description, you must report tip income and allocated tips to the IRS.

Tipping is not considered customary in certain operations:

  • In cafeteria-style operations, where customers serve themselves.

  • When 95% or more of total sales (excluding carryout) include a mandatory service charge of 10% or more.

If tipping isn't customary, your business is not classified as a large food or beverage establishment, and you do not need to file Form 8027

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